During the first half of the year, China's real estate sector saw narrowing sales declines, a marginal recovery trend, a slower pace of supply contraction, and widening divergence in corporate performance and operational strategies.

On August 12, the Viewpoint Index Research Institute released the "Viewpoint Index • 2026 Boao Report," which in its "Residential Development: Structural Recovery" section noted that in the first half of 2026, the pace of adjustment in the real estate industry eased marginally, with sustained recovery signals at the sales end, counter-trend growth among leading central state-owned enterprises, construction and completion activities providing support on the supply side, a gradual slowdown in contraction, a shift in corporate strategies toward quality and cash flow priority, accelerating concentration of credit resources toward state-owned capital at the financing end, and deepening structural divergence across the industry.

Supply contraction pace slows marginally; capital structure divergence persists

From January to June 2026, the national real estate supply side remained in an adjustment cycle, but the pace of contraction showed signs of marginal deceleration. While developer funding overall remained under pressure, internal structural divergence was pronounced, with construction and completion segments operating steadily.

The supply side contracted overall but at a slower pace, with varying dynamics across segments. Development investment maintained its base scale, with national real estate development investment reaching 3,807.4 billion yuan in the first six months, of which residential investment totaled 2,930 billion yuan, with residential development consistently holding the core share of development investment. On the construction front, progress on existing projects remained stable, with total floor space under construction by developers reaching 5,540.49 million square meters, including 3,844.53 million square meters of residential space. No large-scale interruptions occurred in existing construction, providing fundamental support on the supply side.

The new-start segment showed characteristics of "cumulative adjustment with month-on-month recovery," as the pace of supply contraction slowed marginally. Cumulative new construction starts reached 169 million square meters in the first six months, with month-on-month recovery signals gradually emerging. The completion segment continued to play a supporting role in delivery, with cumulative completed floor space of 172.21 million square meters, including 121.48 million square meters of residential completions. Steady progress in completion and delivery effectively underpinned market expectations.

In the first six months, funds available to developers totaled 4,023.3 billion yuan, still in a year-on-year decline, indicating that overall funding pressure on the industry has not yet substantively eased. By structure, domestic loans reached 571.6 billion yuan and self-raised funds 1,474 billion yuan, with financing channels still in contraction and external financing constraints for developers remaining strong. Meanwhile, deposits and advance receipts totaled 1,244.2 billion yuan, and individual mortgage loans reached 513.7 billion yuan.

State-owned developers dominate financing; credit resources concentrate toward leading central enterprises

From January to June 2026, cumulative issuance of real estate bonds reached 257.44 billion yuan, with the industry's financing landscape displaying a clear "state-owned monologue" characteristic, as state-owned developers held a dominant position in both domestic and overseas financing markets.

In terms of financing activity, state-owned developers accelerated their pace in the first half of the year. Since April, Zhuhai Huafa, Poly Developments, Poly Property, and Shougang Development have launched corporate bonds and medium-term notes in succession, with individual issuance sizes generally ranging from 1.3 to 1.6 billion yuan. Financing costs in the domestic bond market continued to decline. On May 22, Poly Developments issued 2.5 billion yuan in bonds, of which the 5-year fixed-rate tranche totaled 1 billion yuan with a coupon rate as low as 1.96% and a subscription multiple of 2.65 times; the 7-year tranche raised 1.5 billion yuan at a coupon rate of 2.36% with a subscription multiple of 1.80 times. On June 10, Yuexiu Property completed issuance of 1.9 billion yuan in corporate bonds at a coupon rate of 1.97%; the following day, China Merchants Shekou's first 2026 corporate bond tranche was set at a coupon rate of 1.50%, setting a new industry low. In April, Zhuhai Huafa's "26 Zhuhua 03" 1.3 billion yuan corporate bond was issued at a coupon rate of only 2.80% with an offline subscription multiple of 3.37 times, fully reflecting institutional investors' allocation appetite for state-owned entities.

On the overseas front, on May 11, Yuexiu Property secured a HK$500 million revolving loan with a 364-day tenor. On May 3 and 12, Greentown China entered into subscription agreements for US$300 million in senior notes with coupon rates of 7% and 7.55% respectively, with proceeds fully allocated to refinancing existing debt. Equity financing tools also continued to gain traction. On February 2, Huafa Industrial announced plans for a private placement of A-shares to its controlling shareholder, Huafa Group, raising no more than 3 billion yuan, earmarked for nine key projects in Zhuhai, Shaoxing, Chengdu, and Hangzhou. Poly Developments plans to issue convertible corporate bonds of up to 5 billion yuan to more than 35 specific investors, approved by the CSRC in June, with proceeds specifically designated for the subsequent development of pre-sold but undelivered existing real estate projects.

Financing cost gradient widens; state-owned credit backing is the core variable in cost divergence

In the first half of 2026, the tiered structure of real estate financing costs continued to solidify, forming a clear three-level hierarchy, with state-owned attributes emerging as the decisive factor in financing costs, and the gap in debt optimization capability across tiers widening significantly.

Based on disclosures at 2026 developer earnings calls, leading central state-owned enterprises generally recorded financing costs in the industry's lowest range of 2.5%-3.8%, with a continuing downward trend: Poly Developments' period-end comprehensive financing cost fell 38 basis points year-on-year to a historic low of 2.72%; China Resources Land's weighted average financing cost dropped to 2.72%; China Overseas Land & Investment reached as low as 2.8%; and Greentown China cut its financing cost substantially by 60 basis points to 3.3% through debt structure optimization. In 2025, leading developers' financing costs generally declined 10-60 basis points compared with 2024, creating a virtuous cycle of lower financing costs and improved debt structures.

The overseas financing environment has not broadly recovered, with only localized signs of improvement. On January 30, Dalian Wanda Commercial Management resumed overseas bond issuance after a three-year hiatus, successfully issuing US$360 million in fixed-rate senior secured bonds with a 2NC1.5 tenor, albeit at a coupon rate as high as 12.75%. On March 10, Seazen Global completed issuance of US$355 million in unsecured fixed-rate bonds on the Singapore Exchange with an annual interest rate of 11.8%, reflecting still-elevated financing costs. However, Greentown China, with strong credit credentials, announced in May the issuance of US$300 million in senior notes due 2029 at a coupon rate of 7%, significantly lower than private enterprises. This underscores that state-owned credit backing has become the core variable driving cost divergence.

This article is excerpted from "Residential Development: Structural Recovery."